AMD’s GloFo deal could lead to inventory issues

AMD might have a bit of trouble due to the basic nature of its contract with Globalfoundries. AMD and Globalfoundries have a “take or pay” arrangement, which requires AMD to buy a flat amount of wafers from its spinoff.

This year AMD needs to buy $1.15 billion worth of wafers, reports Barrons. The trouble is that AMD hasn’t been buying enough. In the first three quarters of the year AMD bought $746 million worth of wavers and the numbers are going down. It bought $269 million in Q1 and just $222 million in Q3. Even if AMD gets $250 million this quarter, it will still end up $150 million short, or it could order heaps of 32nm chips and sell them at a discount. One way or another AMD is bound to take a hit.

Since GloFo doesn’t produce AMD GPUs, the launch of Volcanic Islands products won’t make any difference. What about console custom APUs? Tough luck, the chips inside the PS4 and Xbox One are built by TSMC, too. In theory, it’s possible that GloFo will start making console chips at a later date, but not this year and probably not next year, either.

AMD’s x86 market share is going up, but that’s only thanks to console parts. Sales of its PC chips are actually going down – and that’s what matter for the GloFo deal. What’s more, AMD ditched its plans to build the first 28nm GloFo APUs last year, Kabini and Temash are built at TSMC.

So what about Kaveri, Beema and Mullins? It is still unclear, the rumour mill points to TSMC being tapped for Kaveri (bulk, not SOI), but we are still not sure about Puma-based low-end APUs. Basically there is a very good chance that all AMD 28nm parts next year will be produced by TSMC.